Taiwan must shift its focus from contract manufacturing to branding to keep up its export competitiveness, Chen Tien-jy (陳添枝), president of the Chung-Hua Institution for Economic Research (CIER, 中經院), said yesterday.
"Taiwan has to be alert to the fact that it needs to change its business model now, or it will inevitably suffer trade deficits [in the future]," Chen said.
The nation's economy depends mainly on contract manufacturing, which is especially common in the electronics sector, Chen said.
But according to the latest government data, more than 37 percent of Taiwanese contract manufacturers have moved their production bases abroad, particularly to China, in pursuit of cheaper labor and lower production costs, he added.
With the establishment of supply-chain clusters in China in the near future and the increased amount of goods shipped there, Taiwan will actually be supporting China's manufacturing operations and would not be able to prevent its own exports from shrinking, the economist warned.
In comparison, South Korea chose to build an own-brand business model in the mid-90s and has now started reaping the rewards, with brands like Samsung gaining popularity worldwide, especially in the emerging markets like India, Chen said.
The nation's trade surplus is expected to shrink to about US$3 billion this year from more than US$6 billion last year and nearly US$18 billion in 2003, according to data provided by Citigroup Taipei.
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